National Collegiate Athletic Association

The NCAA News - News and Features

March 17, 1997

Tax on licensed products to fund Seattle stadium raises concerns

BY SALLY HUGGINS
Staff Writer

The Sporting Goods Manufacturers Association is attempting to pull together a coalition to fight legislation in the state of Washington that would place a 10 percent wholesale tax on sports memorabilia or sports-licensed goods, including college-licensed merchandise.

The sports-licensed goods tax is the main funding mechanism for a bill proposed by Washington Gov. Gary Locke to finance the public share of a new football stadium to keep the NFL Seattle Seahawks in Seattle.

The SGMA hopes to create a coalition that would involve sports-product companies, licensors such as the NCAA and the National Basketball Association, consumer groups, and retailers.

Tom Cove, vice-president of governmental relations for the SGMA, said the proposed coalition would work toward educating Washington officials about the long-reaching effects of such a tax.

"It is tremendously scary for those of us in sports products," said Cove. "It is taxing indiscriminately to pay for general policy needs.

"Where does it stop? If it's an important need, find a general source of revenue. If you want to tax those who use it, then tax them through ticket prices or parking."

Prospective Seahawks buyer Paul Allen has said he would purchase the team to keep it in Seattle if a stadium is built to replace the Kingdome. Gov. Locke formed a committee last year to devise funding for the new stadium, estimated to cost $402 million. Allen has offered to pay $100 million of the cost.

The bill before the Washington House in its initial form proposed the tax on sports memorabilia or sports-licensed goods as one part of the funding for the new stadium. Also included was a tax on car rentals.

After hearings before the House Committee on Trade and Economic Development revealed opposition to the proposal, the committee reported the bill out to the full House in essentially a gutted form. The intent statement is there, but the funding portion has been removed.

A similar measure in the Washington Senate was killed by the Ways and Means Committee March 10.

In the House hearings, representatives of all spectrums from sports apparel giant Nike to owners of a Class A baseball team to the NBA complained that it was unfair for their customers to carry the burden for the football stadium.

"There is no reason, in logic or fairness, to require the NBA to pay for the state's football stadium and exhibition center," Jeffrey Mishkin, executive vice-president of the NBA, told the committee.

Despite the bill's present condition, Cove said, he plans to act quickly and broadly to address the issues involved to keep the sports tax from being restored.

The tax as it was originally proposed would have applied to the sale of any sporting-good item that was licensed by an entity such as the NCAA, the University of Washington, the NBA or an individual. Even the sale of an officially licensed University of Michigan shirt in Washington would have been subject to the tax.

Cove said there are several reasons to oppose such a tax:

  • Definition of a licensed product. A product that carried a "licensed by" identification would be taxed but not one bearing only the manufacturer's logo.

  • Discrimination against the people who buy the products. "There is a philosophical premise that the people who buy the products are the ones who will benefit from the stadium," Cove said. "Many young people buy the products, and they are not going to the games."

  • Equity for licensees. A licensee's product may not relate to professional football yet the sale would support the Seahawks.

  • Loss of income. Groups such as the NCAA would be threatened with loss of income through paying the tax and also the possible loss of sales because of the higher cost of the product.

  • Counterfeiting. Counterfeiting of goods to look like those of the NBA, the NCAA and universities is a major problem, Cove said, and such a tax would only enhance the value of counterfeit products because they would appear even less expensive against the increased prices of licensed products.

  • Precedent. If such a measure is approved in Washington, other states might see potential revenue.

    "This is a very high profile, highly volatile, highly sensitive issue," he said. "We don't believe the committee's action has killed the bill. We still are regarding it as a very real threat."

    As it proceeds through the House, the original funding provisions could be restored or new ones written into it.

    The Washington legislature is under a tight time constriction to get the measure adopted. The bill requires the bill, once it is approved by the legislature and signed by the governor, to go before the public as a referendum. Sixty days' notice preceding a referendum is required.

    Allen's option to buy the team -- for which he spent $20 million -- expires July 1. He has said that he would withdraw his offer to purchase the team if the funding is not approved by that deadline.